Where can the CSR money go?

It appears that the government intends to ensure that the CSR spending only goes to specific areas as defined in Schedule VII of the Companies Act, 201

(a) Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water

(b) Promoting gender equality, empowering women, setting up homes and hostels for women and orphans, setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups

(c) Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro-forestry, conservation of natural resources and maintaining quality of soil, air and water

(d) Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects

(e) Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art, setting up public libraries, promotion and development of traditional arts and handicrafts

(f) Measures for the benefit of armed forces veterans, war widows and their dependents

(g) Training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports

(h) Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government

(i) Rural development projects

(j) Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central government for socio-economic development and relief and welfare of the scheduled casts, the scheduled tribes, other backward classes, minorities and women

From Moneylife blog of 1st March 2014

Good CSR Strategy

By: Ashish Dhawan

The Parliament approved the new Companies Bill, which mandates that companies of a certain size spend 2% of their three-year average annual profit towards corporate social responsibility (CSR), is a landmark one as it makes India among the first nations to have social welfare spending as part of company statute by law.

Around 8,000 companies would fall under the Bill's ambit and this mandate would translate into an estimated CSR spending of Rs 12,000-15,000 crore annually. In order to maximise the impact of their CSR, Indian corporate houses need to look beyond the traditional lens of "charity" and develop succinct CSR strategies with potential for large-scale social and economic impact. Private philanthropies set up by India's business leaders can be looked at as models for CSR. The first step towards developing a CSR strategy is to define a maximum of 2-3 social issues.

The Bill & Melinda Gates Foundation, a benchmark for a focused socially-relevant enterprise, chose just two areas of effective and measurable action: education and healthcare. The foundation then made worldwide eradication of polio akin to a business goal and is confident of achieving it in the next six years. In India, the Azim Premji Foundation chose to focus on improving the quality of primary education, and has maintained this effort for over 12 years.

In order to ensure organised and successful CSR initiatives, companies will have to identify and hire an appropriate team of professionals: Tech Mahindra hired Loveleen Kacker, a former senior IAS officer and a domain expert in children's education, to lead its foundation. The Azim Premji Foundation recruited Dilip Ranjekar and Anurag Behar, senior executives from Wipro, to lead efforts towards large-scale impact in education.

The Michael and Susan Dell Foundation has Barun Mohanty and Debashish Mitter, former senior executives with McKinsey & Co and American Express, to help children living in urban poverty. Even at full scale, India's CSR spend will be a drop in the ocean when compared with government expenditure on social schemes. However, even these funds have the potential for large-scale impact as there has been limited scope for innovation within the government system. Corporates should view CSR efforts as R&D by piloting innovative models and gathering evidence of the impact.

Government resources can then be used to scale up smaller operative models. Businesses should not feel pressured to take on the operational responsibility of every initiative they undertake. It is wiser to operate CSR initiatives that are tightly linked to the core line of business and outsource other initiatives to non-profits with expertise.

The Piramal Foundation operates its healthcare initiatives internally, but for its education-related activities, it backed two highly capable social entrepreneurs, Madhav Chavan of Pratham and Aditya Natraj of Kaivalya Education Foundation. For giving to be ingrained in a company's culture, employees must be involved with CSR. At Tech Mahindra, associates engage with communities through partner NGOs. Their CSR goal is to get 10% of company associates to volunteer 10% of their time by 2015.

At HDFC Bank, over 5,000 employees contribute around Rs 1 crore a year through payroll giving. Successful businesses are all driven by measurable goals, strong monitoring processes and data-driven decision-making. Bill Gates has said, "From the fight against polio to fixing education, what's missing is often good measurement and a commitment to follow the data. We can do better. We have the tools at hand." Businesses need to extend these principles to their CSR work.

The new Companies Bill should galvanise companies into collaborative action for real change. For instance, many companies focus on education in their CSR but there are few instances of collaboration. Corporates, who have a vested interest in the quality of education as that is the most powerful tool towards the creation of adynamic workforce, can come together to change the Indian school education system.

The writer is CEO and founder, Central Square Foundation

India’s New Companies Bill Mandates Social Welfare Spending

India’s New Companies Bill Expected To Boost Mergers With Foreign Firms, Mandates Social Welfare Spending:
The bill also requires every company, which has a net worth of 5 billion rupees (almost $82 million) or more; or a turnover of 10 billion rupees or more; or net profit of 50 million rupees or more during any financial year, to spend at least 2 percent of its average net profit earned during the three immediately preceding financial years, every year on social welfare programs.

“Strictly speaking, the CSR (corporate social responsibility) requirement in the new bill is not mandatory, because there are ways out for companies, who can cite compelling reasons to avoid earmarking 2 percent of their profits for social welfare programs,” Christopher Krishnamoorthy, an associate partner at Majmudar & Partners, an Indian law firm based in Mumbai, told IBTimes.

“On a personal level, I find the CSR spending requirement unusual, and I am not aware of  similar laws internationally, apart from tax-breaks and incentives provided toward CSR expenditure. The Indian provision is akin to a sort of tax,” Krishnamoorthy said.

The Bill is expected to be enacted to a Law shortly after the President signs the same.
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